FORUM: Strongest outlook for corn?

Hembree Brandon | Feb 21, 2002

“The two markets are moving in opposite directions in 2001/02,” said Keith Collins, the agency’s chief economist, who presented his analysis of commodity markets at the Agricultural Outlook Forum 2002 at Washington. “Corn stocks are being worked down, and prices are expected to average $2 per bushel, up 8 percent from a year earlier.

“In contrast, soybean stocks are rising and prices this season are expected to decline 5 percent to $4.30 per bushel.”

He said projections are that both corn and soybean acres will increase over 2001, with most of the gains in corn, which could reach 78.5 million acres, producing a crop of 9.9 billion bushels.

“Soybean acres may increase only slightly from last year’s 74. 1 million Û even with a continuation of the $5.26 per bushel loan rate – with production projected at near 3 billion bushels.”

Another factor favoring corn: Nitrogen fertilizer prices are down in comparison to last year, Collins noted.

“When all is said and done, the 2002/03 corn market appears to be the strongest of the major crops. Although production may approach 10 billion bushels and exports increase only slightly, domestic demand is expected to be quite strong, with corn used for ethanol increasing to 30 percent. Carryover stocks of corn should decline again.”

Despite soybean exports close to 2001’s record level, stocks may rise again and prices average only about the 2001 level.

“There will simply be a lot of oilseeds available in the world market in 2002/03,” Collins said.

Brazil will account for most of the gain “and is sure to be a formidable competitor in the future.” Large South American soybean inventories going into 2002/03 and further acreage/production expansion in 2003 will “keep oilseed prices under pressure.” Soybean plantings in South America are expected to continue expanding “as long as U.S. prices are around $4.25 or higher.”

Availability of large soybean supplies from the Southern Hemisphere has changed the oilseed sector for three reasons, Collins said:

There is less reliance on the U.S. as the major supplier to the world.

Large, new crops available twice a year may lead to lower prices as alternative supplies reduce risk for foreign buyers.

More competition for U.S. fall sales is likely as South American crops and stocks increase.

“With greater availability of foreign soybean supplies, the global stocks-to-use ratio has remained relatively high and stable,” Collins noted. “Concerns about a possible slowdown in China’s imports and a possible shift in their grain acreage toward oilseeds are also overhanging the market.”

China is key to insuring that consumption keeps pace with production increases, he said. “Protein consumption in China has increased more than 10 percent per year since 1997, led by increases in livestock production and shifts toward feeding more optimal rations. Growth in production of soybeans and other oilseeds has not kept pace, leading to strong gains in their imports.”

World use of energy and high protein feeds appears to continue expanding and to be little affected by the global economic slowdown and animal disease scares, Collins said.

“The demand growth has reduced world coarse grain stocks again, even though world production was up a bit, mainly due to large crops in Central and Eastern Europe, which offset lower U.S. Canadian, South American, and Chinese crops.

U.S. corn exports are expected to expand slightly, he said, due to lower South American production and World Trade Organization constraints on exports by China.

“For 2002/03, global coarse grain production and use are expected to rise again. Production should increase, mainly due to larger corn crops in the U.S. and China. Larger corn and barley crops in Canada will likely reduce Canadian corn imports. Additionally, there will be ample supplies of wheat for livestock feeding. We are currently expecting corn exports to reach about 2 billion bushels, slightly above last year.”

Overall oilseed trade may grow at a somewhat higher rate in 2002/03, Collins said, based on expected strong production gains in world oilseed crops, especially rapeseed and sunflowerseed, with yields for those crops rebounding from drought-reduced levels last year.

“Underlying demand for protein meals and oils is expected to increase 3 percent to 4 percent. The strong protein market is helping to push U.S. soybean exports to a record high 1.02 billion bushels this season, with a similar level expected for the 2002 crop.